Converting retirement benefit into a life care annuity with graded benefits*

This paper deals with life care annuities, i.e. bundled products comprising a life annuity and long-term care insurance. It aims to assess the cost of converting retirement benefit into a life care annuity with graded benefits using a pre-existing public pay-as-you-go pension scheme. With this objective in mind, we present an actuarial method based on array calculus for valuing this type of life care annuity. The health dynamics of the annuitant rely on a reversible illness-death multistate framework. The paper contains a numerical example in which mortality and disability assumptions are based on data from the USA and Australia, although this should be viewed simply as an illustration. In addition, in order to check the coherence of these data, we compute life expectancy for both healthy and dependent persons, and then for dependent persons in each of the states of dependence. The effect of ruling out the recovery assumption on the annuity’s cost is also assessed. The analysis provides valuable insights into how much it would cost to introduce these annuities and enables us to make some policy recommendations to help ensure that this combined pension scheme has a good actuarial design.     

Evolving China Strategies: How the Japanese Compare

Taking a sceptical view of the ‘Asian miracles’ proposition that government failure is the main culprit behind development failure, this article reviews the Philippine development experience. The Philippine configuration consists of a weak state carrying out industrial promotion and a large private sector whose dynamics depend heavily on state-managed privileges. In the final section, the article proposes an alternative to the rent-seeking model, in which rents defined as returns contingent on political position and rivalry over political position determine private investment behaviour. In such a society, there is limited internal basis for structural change and growth is accidental to external developments.     

Reforming the EU Emissions Trading System: An Alternative to the Market Stability Reserve

Prices for emission allowances in Europe’s Emissions Trading System (ETS) have remained low for many years. This has given rise to controversies on whether there is a need for a fundamental reform of the ETS. Potential reform proposals include the introduction of a price fl oor for certifi cates and a market stability reserve, which is a rule-based mechanism for steering the market volume of allowances and is the preferred approach of the European Commission. In this article, we instead recommend retaining the ETS and suggest correcting past mistakes by a single intervention.     

Estimating the capital charge for external fraud risk： A clinical study

The main objective of this paper is to estimate the economic capital for covering the external fraud risk within a financial institution. This is a kind of operational risk which is due to acts of a type intended to defraud, misappropriate property or circumvent the law, by a third party. From the methodological point of view, we apply the Loss Distribution Approach （LDA）, based on the Internal Operational Loss Database （IOLD） provided by a Spanish Saving Bank. More specifically, we asses the potential impact of the severity distribution on the Capital at Risk （CAR）. In absence of normality, we try to adjust the Lognormal, Weibull and Exponential functions when modelling the severity of losses. As a result, we find a high divergence in terms of capital charge depending on the statistical model selected. In consequence, in order to obtain a realistic model, we highlight the relevance of the goodness of fit between the empirical and the theoretical distribution.     

Deutschlands Energieversorgungsrisiko gestern,heute und morgen

Along with the oil price, concerns about the security of energy supply have soared once again in recent years. In this paper, we analyze Germany’s past und future energy security situation and compare it to that of other G7 countries using a statistical indicator of the long-term energy supply risk and empirical energy data for the years 1978 through 2007. We find that Germany’s energy supply risk has increased substantially since the oil price crises of the 1970s, whereas France and Japan have managed to reduce their risks dramatically, most notably through the deployment of nuclear power plants. Among G7 countries, Germany’s risk is only surpassed by that of Italy, while it can be expected that the German energy security situation may deteriorate in the future, not least due to the phase-out of nuclear power.     

Cost–consequence analysis of a hemostatic matrix alone or in combination for spine surgery patients

Background: A five-year retrospective database analysis comparing the use of Floseal¹ flowable topical hemostat alone (F) and in combination with gelatin/thrombin (F?+?G/T) to achieve hemostasis and control surgical bleeding showed higher resource utilization for F?+?G/T cases relative to F matched pairs during spinal surgery. Lower resource use in the F group was characterized by shorter hospital length of stay and surgical time as well as fewer blood transfusions and less hemostat agent used per surgery.

Objective: To evaluate the cost–consequence of using F compared to F?+?G/T in minor, major and severe spinal surgery from the US hospital perspective.

Methods: A cost–consequence model was developed using the US hospital perspective. Model inputs include clinical inputs from the literature, cost inputs (hemostatic matrices, blood product transfusion, hospital stay and operating room time) from the literature, and an analysis of annual spine surgery volume (minor, major and severe) using the 2012 National Inpatient Sample (NIS) database. Costs are reported in 2017?US dollars. One-way and probabilistic sensitivity analyses address sources of variability in the results.

Results: A medium-volume hospital (130 spine surgeries per year) using F versus F?+?G/T for spine surgeries is expected to require 85 less hours of surgical time, 58 fewer hospital days and 7 fewer blood transfusions in addition to hemostat volume savings (F: 1?mL, thrombin: 1994?mL). The cost savings associated with the hospital resources for a medium-volume hospital are expected to be $317,959 (surgical hours?=?$154,746, hospital days?=?$125,237, blood transfusions?=?$19,023, hemostatic agents?=?$18,953) or $2445 per spine surgery.

Conclusions: The use of F versus F?+?G/T could lead to annual cost savings for US hospitals performing a low to high volume of spinal surgeries per year.